As an Indian resident, you may have multiple bank accounts and other banking products such as a Credit Card. You may be trading in the stock market with a Demat Account. You may also have accounts in multiple banks.
Now let’s suppose you are being transferred abroad by your employer for an unknown period, or you are going abroad to live with your children or set up a business abroad. When that happens, your residency status changes to a non-resident Indian (NRI). You may have doubts about conversion of Resident Account into NRI Account.
Once you become an NRI, what happens to your relationship with your banks where you have resident accounts?
As your resident status changes, so will the status of your bank accounts and other banking products you might be using. The Foreign Exchange Management Act (FEMA) states that NRIs cannot hold resident accounts. So, all your accounts have to be either closed or converted into NRI Accounts. You can convert them into Non-Resident Ordinary (NRO) Accounts and continue to deposit funds generated within India into them. In most cases, the account number does not change. If you want to send money from your country of residence to your loved ones in India, you will have to open a Non-Resident External (NRE) Account. The NRE Account is tax-free.
What happens to your resident Credit Cards?
So if you are using a Credit Card attached to a Resident Account, it will cease to function when you convert your account into an NRI one. You will be issued a new card once the account is converted.
Can you convert resident Credit Card into NRI Account?
Banks require that you attach your Credit Cards to your NRI Accounts. So, yes you can convert your Credit Card into NRI Account. However, the payments of the Credit Card can be made only through an NRO Account. What you should understand is, using a Credit Card abroad entails transaction costs involved. If you still wish to maintain your resident Credit Card, you can use it when you are back in India.
What happens to other products?
If you have a Fixed Deposit or a Recurring Deposit, you can convert them into NRI Accounts and continue to make deposits from your NRO Account. As an NRI, you can continue to invest in the stock market in India. However, your resident, Demat Account has to be closed. You will need to open a new NRI Demat Account which is attached to an NRE or NRO Account. If you want to make repatriable investments, you can do so with your NRE Account. For non-repatriable investments, you can use your NRO Account.
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*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.